Yahoo-Microsoft: Corporate Culture Problem Squared

Microsoft faces an enormous challenge reconciling its corporate culture with Yahoo's more relaxed environment if the proposed $44.6 billion merger is to succeed.

Even before Microsoft's bid, Yahoo employees were complaining about the gulf between Yahoo's increasingly staid atmosphere and the more freewheeling startup culture at the companies Yahoo has recently acquired.

"Yahoo has a challenge keeping morale high at its acquisitions," said one person at a company recently acquired by Yahoo. "Working in a large company is very different from working in a small company, and the transition has not been painless." The person, who now works for Yahoo, spoke only if not identified because they were not authorized to speak publicly.

Yahoo has made acquisitions — it spent over $1 billion last year to acquire Right Media, Blue Lithium, and Zimbra — central to its strategy of dominating "display-based" advertising (as opposed to text-based ads, which are Google's forte.)

In essence, the employee said, Yahoo's corporate culture stifles the qualities it hoped to capture by acquiring those companies in the first place — innovation and agility, for a start.

"There's a coordination cost of doing business at Yahoo, because the teams are larger," the employee said. "It results in a high percentage of your day being spent on meetings and conference calls, and much more difficulty making decisions promptly and efficiently."

Given Yahoo's pre-existing problems integrating acquisitions, Microsoft's challenge in combing the companies is exponentially greater.

Still, Yahoo employees think the Microsoft deal will be consummated.

"People think the deal will happen," the Yahoo employee said.

Indeed, he added: "People are joking about it. They're happy about the bump in the stock price."

by Sam Gustin